Jamestown Foundation's China Brief, July 2010
July 14, 2010
by Richard Weitz
When Chinese officials consider their international economic interests, Afghanistan and Central Asia (sometimes referred to as “Greater Central Asia”) naturally come to mind. These countries possess an abundant supply of untapped natural resources, and they offer potential export markets as well as investment opportunities for the People’s Republic of China (PRC). Moreover, these territories can provide the conduit through which the PRC imports and exports goods from and to other economically important regions of the world. Increasing the volume and types of goods available from/to China requires improving the region’s means of transportation, with railroads representing an important element along with surface roads, energy pipelines, and shipping by sea and air.
Recent revelations of vast untapped mineral resources in Afghanistan have undoubtedly peaked Chinese interest in developing rail connections and related commercial infrastructure in Afghanistan. According to new reports, U.S. geologists have discovered around $1 trillion worth of iron, copper, cobalt, and lithium reserves scattered around Afghanistan, including the Taliban-strong southern and eastern regions along the border with Pakistan. Pentagon officials believe these mineral resources will help transform conflict-ridden Afghanistan into a modern industrial state (New York Times, June 13). Yet, a difficult political situation, bad surface roads, and the lack of railroads prevent exploitation and shipment of these resources to markets (Ferghana.Ru Information Agency, April 12, 2009).
In recent years, the Chinese government has launched a sustained campaign to develop the region’s transportation and other commercial infrastructure. In the case of railroad construction, the PRC brings several distinct advantages to this endeavor. China is located adjacent to Greater Central Asia and has been undertaking a large domestic railroad construction program that, in addition to generating jobs and developing the PRC’s own national infrastructure, has helped give the PRC workers and technologies suitable for building railroads (Beijing Review, May 31, 2009). Chinese representatives can also describe their partnership with the governments of Afghanistan and Central Asia as a natural “win-win” arrangement. Indeed, these countries are rich in natural resources such as energy and minerals but are strapped for funds, whereas the PRC has surplus investment funds but depends increasingly on imported natural resources.
Although PRC policy makers have limited their military involvement in Afghanistan, they have encouraged Chinese companies to invest in developing the country’s natural resources. Recent PRC investment activity in Afghanistan has concentrated on gaining access to these raw materials and developing the infrastructure required to transport these goods to Afghanistan. The most famous Chinese-run project is the exploitation of the Aynak copper mine near Kabul, which is scheduled to begin operating in 2012 . The Metallurgical Corporation of China (MCC) purchased a controlling stake in 2008 at a cost of $3 billion, the largest single foreign investment project in Afghanistan. The state-owned MCC could offer a package of benefits that its private sector competitors could not match. As part of the deal, which requires additional Afghan infrastructure to realize, the Chinese agreed to build the transportation network needed to bring equipment and other supplies to the mining site as well as to export the extracted copper to the PRC. This would include Afghanistan’s first major railroad, which will convey freight from western China through Tajikistan to the site and from northern Afghanistan to the country’s southeastern border with Pakistan (RFE/RL, May 29, 2008). At present, Afghanistan only has two short railroad lines across its northern borders with Uzbekistan and Turkmenistan. (A third route that crosses the Afghan-Pakistan border is not currently in operation). The first 15-km line connects Kheyrabad to Termez in Uzbekistan. From Termez, the line provides access east to Tajikistan and west to Turkmenistan. The second 9.6-km line, run by Turkmen railroads, links Towraghondi to Kushka in Turkmenistan . The resulting requirement to unload and reload cargo from rail to truck and vice-versa is considered a major impediment to Afghanistan’s foreign trade .
The government of Afghanistan is also working with its neighbors to build additional lines that would support the main regional transit routes linking Iran and Pakistan with Central Asia. A proposed Shirkhan-Bandar-Kondoz-Mezare-Sharif-Herat line under consideration would connect Afghanistan’s rail system with that of China’s through Tajikistan . In May 2010, the Minister of Mines, who is co-hatted as “Coordinator of Cluster for Economic & Infrastructure Development, said Afghanistan planned to develop three lines, totaling 2000 km, at a cost of almost $6 billion. These would run from Shirkhan Bandar on the Tajikistan border to Kunduz province to Balkh province to Herat, linking it to Iran, and with a branch to the Uzbekistan border from Mazar-i-Sharif to Hayratan, as well as an Andkhoy to Aqina line to the Turkmenistan border. A second line would run from Mazar-i-Sharif to Pul-i-Khumri to Kabul to Jalalabad to Torkham at the Pakistan border. A third line would run from Chaman in Pakistan to Spin Boldak to Kandahar. The statement says these lines would be 1435 mm (standard) gauge, designed for 25-ton axle loads, speeds of 100-160 km/h and capacity for 10-12 pairs of trains a day . The Chinese rail network could connect through Pakistan or Tajikistan.
Also in May, the foreign ministers of Iran and Tajikistan signed a memorandum of understanding to begin technical studies assessing how to connect Tajikistan’s railway network to that of Iran via Afghanistan. Iranian Foreign Minister Manouchehr Mottaki said that the proposed connecting railway would link the rail networks of China, Kyrgyzstan and Afghanistan to Iran’s railway network and allow for the transport of goods to Iran’s Persian Gulf ports (IRIB World Service, May 19). The construction of a railway from Tajikistan's east directly to China (such as between Kabul and Kashgar) is considered an alternative option . Tajik economist Hojimuhammad Umarov, however, believes that his country cannot afford the costs of constructing a railway to either Afghanistan or China for at least five years (RFE/RL, May 31). But in May 2010, Chinese officials expressed interest in helping construct a railroad between Dushanbe and Vakhdat and Yavan. This project is currently under development by Tajikistan’s state railroad company, but the Tajik government needs additional funds to complete it (Avesta.tj [Tajikistan], May 31). Interestingly, the Indian government has been constructing a deep-water port at Chabahar, located in eastern Iran, to counter China’s support for Pakistan’s construction of a deep-water port at Gwardar, in southwest Balochistan. The value of using Iranian ports for either China or India would depend on how international sanctions constrained Iran’s commercial relations with world markets.
China’s Regional Economic Interests
Although Chinese policy makers are seeking to increase economic ties with Central Asia and Afghanistan in general, they are particularly eager to expand links between this region and the PRC’s relatively impoverished northwestern provinces. Increased commerce could help promote the development of Xinjiang, Tibet, and other regions that have lagged economically behind the PRC’s vibrant eastern cities (Washington Post, June 29). Although trade with Central Asia represents a small percentage of the PRC’s overall commerce, it already represents a more important share for northwest China. This consideration applies particularly to restless Xinjiang, which is abundant in natural resources and has a relatively well-developed transportation infrastructure , but suffers from ethnic tensions between the indigenous Uighurs and the ethnic Hans who have immigrated into the province in recent decades. More than half of Xinjiang’s foreign trade already derives from commerce with Central Asian countries . The PRC government is developing new rail, pipeline, and other infrastructure links that would tighten connections between Xinjiang and both Central Asia and the rest of the PRC (Uzreport.com, January 1, 2008).
Further major increases in China’s economic exchanges with or through Greater Central Asia will require substantial improvements in the capacity of the region’s transportation infrastructure. The regional governments, other countries and various multinational institutions have launched various initiatives to help establish a modernized trans-Eurasian corridor that would ideally create a modern version of the old Silk Road . Yet, the most important initiatives to coordinate transport investment in Central Asia—the Transport Corridor Europe Caucasus Asia (TRACECA) program launched in 1993 by the European Union, and the Central Asian Regional Economic Cooperation (CAREC) program initiated in 1997 by the Asian Development Bank (ADB)—have proved unable to overcome the region’s inadequate transportation infrastructure. The availability, quality, and costs of transport services throughout Greater Central Asia compare unfavorably to alternative routes, especially containerized maritime shipping . The local countries, their Western partners and the multinational institutions have lacked both the considerable funds required to comprehensive upgrade Great Central Asia’s transportation networks and the ability to pursue an integrated strategy managed by a single overarching authority.
China has managed to bring both these assets to its Eurasian rail building campaign. The PRC government can design and fund rail networks, including subsidizing the purchase of Chinese-made rail equipment by foreign countries, though these projects are naturally optimized to serve Beijing’s economic interests. China’s Eurasian railroad building campaign also helps overcome another potential barrier to PRC commerce in and through Central Asia: the legacy of the formerly integrated Soviet economy in Eurasia. At the time of their independence, the major roads, railways and energy pipelines in the new states of Central Asia all flowed northward towards Russia rather than eastward toward China. The PRC has been funding several major infrastructure projects to spur east-west traffic, while supporting the efforts of international organizations like the Shanghai Cooperation Organization (SCO) and the Asian Development Bank to address some of the non-physical barriers to trade and investment.
China’s Railroad Expansion
Kazakhstan represents China’s most important economic partner in Central Asia. In 2008, bilateral PRC-Kazakhstan trade amounted to $17.5 billion (Xinhua News Agency, June 10). It is therefore not surprising that China’s railroad building efforts have primarily focused on expanding the transit capacity with Kazakhstan. In fact, the 460 km line between Urumqi in Xianjiang and Akataw Pass, where it connects to Kazakhstan’s railways, represents China’s only currently operational rail link with Central Asia. In 2009, the Alataw Pass Port became a free-trade zone, allowing Kazakh citizens to enter visa-free for one day (People’s Daily, December 24, 2009). The increased transit capacity with Kazakhstan should allow China to import copper from the major Boschekul border deposit, whose development will presumably be financed by some of the $2.7 billion China’s Development Bank lent to Kazakhmys, a Kazakh copper company. The field is expected to produce 100,000 tons of copper annually starting in 2014 (Reuters, March 11). China has recently spent large sums of money to expand the capacity of its railroad network near Urumqi. In March 2010, work began on a second railroad linking Urumqi with inland cities with the purpose of reducing travel time and increasing the shipment of coal, whose deposits and production is concentrated in Xinjiang and Inner Mongolia (People’s Daily, April 25).
China is also financing construction of a second railroad to Kazakhstan that links Horgos with Zhetygen (Kazakhstan Times, June 14). It spent 300 million yuan (approx. $44 million) to build nine broad gauge rails (Russian standard) and six standard gauge rails to Alataw-Pass. This increased volume will allow for the importation of 50,000 tons of Liquefied Natural Gas (LNG) this year and 200,000 tons of LNG in the next three years (MetalNewsNet, June 17). On June 14, 2010, a freight train carrying 45 tons of LNG crossed the Chinese-Kazakh border at the Alashankou checkpoint en route to delivery to the Dushanzi petrochemical plant located in northern Xinjiang. The shipment marked the first time that China imported energy resources from Central Asia by rail (Journal of Turkish Weekly, June 16).
Chinese officials have considered building a railroad into Kyrgyzstan, though with less enthusiasm than Beijing has been pursuing rail connections with Kazakhstan, which has vast energy deposits and is emerging as a rapidly developing economy. In contrast, Kyrgyzstan is a poor and unstable country. It has some coal reserves in the south that might interest China, but these are largely undeveloped (Regnum.Ru, January 29, 2009). Ironically, it is Kyrgyzstan’s very political instability that is driving Chinese efforts to promote that country’s development through enhanced trade and investment in order to alleviate the poverty that might be promoting that country’s political instability and extremism, which PRC officials fear might be contributing to the same phenomena in Xinjiang (China Briefing, September 11, 2008).
China has held talks with Kyrgyzstan and Uzbekistan on the construction of a railroad since the late 1990s, including within a SCO framework. In a 2006 joint statement, Chinese and Kyrgyz leaders agreed to conduct technical evaluations for a possible railroad link (Xinhua News Agency, June 10, 2006). The railroad through Kyrgyzstan would allow China to shorten its route to Central Asia to 268 km, connecting to Uzbekistan’s rail network in Fergana Valley. The proposed line would start in the Chinese city of Kashgar, enter Kyrgyzstan at the Torugart Pass, follow a route to Kara-Suu near Osh, and terminate at Uzbekistan’s Andija (EurasiaNet, March 30, 2009). Kyrgyzstan would benefit from the increasing number of tourists that could visit the scenic lake Issyk-Kul and ability to collect taxes on cargo (Eurasec Inform, March 30). China would be able to sell more of its goods in Central Asian markets, leading to enhanced PRC influence in the region. Uzbekistan, where the proposed railroad would terminate, has the second most extensive railroad network in Central Asia after Kazakhstan. Since 2001, Uzbekistan has engaged in major railroad construction efforts. The ADB believes Uzbekistan enjoys the most favorable location to serve as a Eurasian transportation hub. It is also the only Central Asian country that possesses rolling stock manufacturing and repair capabilities. According to the ADB, the China-Kyrgyzstan-Uzbekistan standard-gauge railroad, if completed, could make Uzbekistan the most efficient link between China and Central Asia .
Various obstacles continue to block former agreement on this proposed China-Kyrgyzstan-Uzbekistan railroad. First, the Chinese government continues to negotiate the terms of ownership and financing for a railway that could cost $2 billion to build (BBC Monitoring Central Asia, March 31, 2009). Second, Russian representatives have opposed the project, which could threaten their rail dominance in Central Asia. Third, unlike Uzbekistan, Kyrgyzstan has yet to follow Beijing’s request to adopt the narrow gauge for the network. Yet, Uzbekistan has remained less interested in the project than the other two governments. Uzbek leaders have long adopted a cautious and protectionist approach toward granting access to their country’s resources. Furthermore, Kazakh officials have not supported the project for fear of losing cargo transit on their own country’s network . Finally, the crisis in Kyrgyzstan has resulted in the project’s de facto suspension. Nonetheless, analysts believe that once these issues are resolved, as well as the new problems resulting from the political chaos in Kyrgyzstan, the railroad itself can be completed in a short period of time (Eurasia Daily Monitor, February 14).
China is making progress in improving Eurasian rail networks, but the existing and proposed near-term rail links between the PRC and its western neighbors will still service only a small share of China’s foreign commerce, which will likely remain dominated by containerized cargo shipping by sea. The one development that might change this situation—the construction of high-speed rail networks through Greater Central Asia that would connect the PRC directly to European markets by land--would require hundreds of billions of dollars that the parties do not presently possess (Asia Times Online, April 14). Even the more modest proposals to construct a more limited complex of rail lines linking China with Central Asia as well as Afghanistan have encountered serious obstacles. First, the parties continue to dispute the terms of financing and the question of ownership. Second, influential Russian interests have opposed some projects, seeing them as a threat to Russia’s rail hegemony in Eurasia. Furthermore, China’s investment in infrastructure is diluted by Chinese railroad building in other foreign regions and even more so within the PRC’s borders, which will remain a priority as long as Beijing is eager to stimulate domestic job creation. Finally, the non-physical impediments to commerce in and through Central Asia and Afghanistan are perhaps greater than the lack of adequate railroads and other means of transport. These barriers include suboptimal visa and customs policies, inadequate financial and communications networks, deviations from international legal standards regarding property rights, and transnational threats such as Islamist terrorism and narcotics trafficking that make governments reluctant to relax their border controls.
1. Ministry of Mines, "Aynak Copper Deposit Exploitation on Track to Begin Operations in Two Years,"
May 27, 2010, mom.gov.af/index.php.
2. Wolfgang Danspeckgruber, et al., "Railroads: Afghanistan's Century Project," from Petersburg Papers on Afghanistan and the Region, Vol. 4 (2009) (Liechtenstein Institute on Self-Determination), www.ciaonet.org/wps/lisd/0018577/f_0018577_15903.pdf.
3. Masood Aziz, "Afghanistan," The New Silk Roads: Transport and Trade in Greater Central Asia, edited by S. Frederick Starr (Washington, DC: Central Asia-Caucasus Institute & Silk Road Studies Program, 2007): 53.
4. “Regional Summit Meeting of Afghanistan and Neighbors,” The Secretary General’s statement
Economic Cooperation Organization, Istanbul, January 26, 2010, www.ecosecretariat.org/Sg%20Statement/SUM-AF.HTM.
5. Afghan Government Plans Three Standard Gauge Railways,” Railways of Afghanistan, June 13, 2010, www.andrewgrantham.co.uk/afghanistan/2766/afghan-government-plans-three-standard-gauge-railways/.
6. Ministry of Mines, "Railway from Torkham to Amo Darya Connects Middle Asia to Indian Ocean,"
Islamic Republic of Afghanistan, May 10, 2010, mom.gov.af/index.php.
7. Niklas Swanstrom, Nicklas Norling, and Zhang Li, "China," The New Silk Roads: Transport and Trade in Greater Central Asia, edited by S. Frederick Starr (Washington, DC: Central Asia-Caucasus Institute & Silk Road Studies Program, 2007): 389.
8. Zhao Huaheng, “China, Russia, and the United States: Prospects for Cooperation in Central Asia,” CEF Quarterly: The Journal of the China-Eurasia Forum, February 2005: 24,
9. S. Frederick Starr and Andrew C. Kuchins, The Key to Success in Afghanistan: A Modern Silk Road Strategy (Washington, DC: Central Asia-Caucasus Institute & Silk Road Studies Program, 2010): 1-20.
10. Asian Development Bank, www.adb.org/Documents/Reports/ca-trade-policy/chap5.pdf.
11. Uzbekistan Trade Logistics Presentation, Asian Development Bank (2008), www.adb.org/Documents/Events/2008/Trade-Logistics-Final/CS1-UZB-presentation.pdf.
12. Sebastien Peyrouse, “Economic Aspects of the Chinese-Central Asia Rapprochement,” Silk Road Paper (September 2007): 27.
Richard Weitz is a Senior Fellow and Director of the Center for Political-Military Analysis at Hudson Institute.
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